Fire-resistant Home Upgrades In Dallas: Will They Lower Your Insurance Premiums? – Dallas-Fort Worth homebuilders posted a solid showing in the first quarter of the year as the “new normal” era of higher mortgage rates.
DALLAS – Read this story and other North Texas business news from our partners at the Dallas Business Journal
Fire-resistant Home Upgrades In Dallas: Will They Lower Your Insurance Premiums?
Builders started construction on 9,691 homes in the quarter — up from 8,060 in the final quarter of last year, but down 39% from the year-ago level of 16,014 in the first quarter of 2022, according to Dallas-based Residential Strategies Inc., a Texas market research and consulting firm that specializes in tracking new home activity.
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The annual pace of starts stood at 42,422 housing starts, down 28% from the pulsating pace of 58,894 starts this time last year.
Builders reported a welcome increase in traffic and sales during the first quarter, boosting sales of speculative inventory completed earlier in the year, said Ted Wilson, principal of Residential Strategies.
“Field reports show that many relocation buyers coming to DFW in the last two to three years were initially turned down in their attempts to buy a home, and ended up renting instead,” Wilson said. Wilson said. “These families are now coming out and taking advantage of the discounts and mortgage rate buy-downs that are being offered. The typical home buyer is now making peace with this era of high mortgage rates and moving forward with their purchase decision.
Peter Shaddock Jr., co-owner of Plano-based Shaddock Homes, said interest rates that are double what they were a year ago are affecting builders differently based on the price of their homes.
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“If you are talking about DR. Horton or LGI Homes or those (production) builders, their primary competition will be apartments,” Shaddock said. “If they can’t get the numbers to match what the apartments are doing on a PITI basis – principal, interest, tax and insurance – then it’s going to be a squeeze on their margins or their velocity. is For us (at Shaddock Homes), many of our buyers have a significant down payment, are more financially literate, they know this too shall pass. So they either do all cash or they can do a minimum loan or they can do an ARM or hopefully mitigate the temporary interest rate hikes that we’re going through right now.
Last month, Shaddock Homes began development on a 490-home community in Rockwall called Homestead. Home prices there will start in the mid-$500,000s, and Shaddock, Drees Homes and Coventry Homes will build homes in the community.
For the first quarter, DFW builders closed sales of 13,067 homes, according to Housing Strategies, pushing the annual closing pace to a new record high of 52,076 homes.
“Homebuilders dodged a bullet with the exceptionally strong market that has occurred since January,” Wilson said in the Housing Strategies report. “There was concern that unsold ‘spec units’ “The magnitude of that could be a problem, but most builders say their backlog of unsold homes has been reduced and is very manageable at this point.”
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The amount of inventory under construction, much of which was specifically started, peaked at 42,936 homes in the second quarter of 2022, representing a 10.6-month supply of inventory. . Casey Gibson, senior vice president of housing strategies, said that as of March 31, inventory under construction worked up to 27,558 units, reflecting a more balanced 6.4-month supply.
“Our homebuilder customers share that, with a slowdown in the beginning, subcontractors and trades can better keep up with the current level of workflow in the market,” Gibson said. “As a result, cycle times (the time it takes to build a home) have improved for most DFW area builders.”
Ending vacant inventory increased to 8,595 homes during the quarter, representing a 2.0-month supply. An empty supply between two and 2.5 months is considered healthy.
After a run up in the 30-year mortgage rate through most of 2022, a modest rate drop during the first quarter of this year played a key role in improving market conditions, according to a Housing Strategies report.
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In November 2022, the 30-year rate is above 7%. For the week ended April 6, the 30-year mortgage rate averaged 6.28%, according to Freddie Mac.
“When the 30-year rate hit the 7% level, buyer traffic and sales in North Texas slowed significantly,” Wilson said in the report. “Since then, the 30-year mortgage rate has dropped, which has helped improve housing affordability in DFW.”
Now, however, builders are facing a relatively new dilemma: the potential availability of credit to private homebuilders and lot developers in light of recent banking sector challenges, Wilson said. That could give larger, public builders an edge in the market, he said.
“Large public builders will continue to have access to pre-established bond money that is priced cheaply, allowing them to potentially capture additional market share in the coming quarters,” Wilson said.
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According to Housing Strategies, the slowdown in the annual opening rate, coupled with the high level of growth, has reset the DFW vacant lot supply into balance.
As of March 31, the market had 85,205 vacancies, representing a 24.1-month supply. A two-year supply is considered accurate.
In addition, 80, 762 lots are under development. Wilson said the pace of lot deliveries will continue to average 15,000 units per quarter for the remainder of 2023.
With the quarter expected to average about 10,000 per quarter, vacant development lot supply should climb by about 5,000 per quarter to a level of 100,000 by the end of the year, Wilson forecast. But with very few development starts in recent quarters, Wilson expects lot supply to return to a balanced level later in 2024.
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Inventory and sales transactions remain muted in the current home market, according to data released by the Texas A&M Real Estate Data Center.
For the 12-month period ending February 2023, the DFW market produced 95,364 existing home sales, down 14.4% year over year. Inventories have declined in recent months and stand at just 15,753 units, representing a 1.98-month tight supply. Six months supply is considered as balance.
Builders benefit from the lack of pre-owned inventory on the market, Wilson said. Families are increasingly turning to new home offers this spring, he said.
Housing Strategies includes single-family rental units as part of its quarterly housing data. During the first quarter of this year, there were 561 rental house starts and the annual (2Q22-1Q23) rate totaled 3,816 units. At Build Native, we take a holistic approach to green home building – considering all the factors that go into designing and building a high performance, energy efficient custom home:
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